Commodities’ volatility continues

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Australian broker Jonathan Barratt says the price of oil still has a “lot more weakness”

Commodity prices have fallen for a second day in early trading in Europe, led by another drop in crude oil.

The further volatility comes after markets were hit by one of the biggest sell-offs in two years on Thursday.

Brent crude fell 5.8% to $105.15 a barrel, adding to an 8.6% drop on Thursday, before rebounding to $108.

Industrial metals also saw further falls, as did cotton. But stock markets fell only slightly, suggesting fears over the world economy may be limited.

Copper futures were down a further 1.75%, following a 6% slide a day earlier, before bouncing.

Meanwhile, the price of US sweet, light crude oil fell a further 5.5% on Friday morning to $94.63 a barrel, but then recovered to above $97.

Economy fears

However, precious metal prices – such as gold and silver – held steady, despite having previously followed other commodities sharply lower during Thursday’s market rout.

Stock markets also proved resilient, with European shares mostly recovering from initial falls by mid-morning.

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The movements indicate that fears over the health of the global recovery may be contained for now, despite disappointing data on US benefit claims and German industrial orders.

All eyes will now be on the US Labor Department, which will release April unemployment figures later on Friday.

The dollar also remained stable against other currencies on Friday morning, in contrast with Thursday, when a sharp rise in the greenback contributed towards the fall in commodity prices, which are measured in dollars.

Rebound short-lived

Earlier in the day, during Asian trading hours, commodity prices had recovered some of the ground lost on Thursday as buyers were attracted by the cheaper prices.

Victor Shum of Purvin and Gert energy consultants said oil markets were clawing back some of their losses, as Asian traders capitalised on cheap crude prices and bought back into the market.

“Prices are up but this is not unusual after a massive sell-off, we are observing some market participants considering this as a buying opportunity,” he said.

But with the open of trading in Europe, these gains were quickly wiped out as the market pushed lower.

Analysts warn the volatility in the markets could remain.

“When you have this kind of damage, it will take several weeks, or maybe several months… for confidence to be rebuilt,” said Dennis Gartman, author of a markets guide.

“It’s not the end of the commodities cycle, not even close. You still have to call this a correction. It’s a sizable one and scared the heck out of everybody.”